London 16/11/2012 - Base metals backtracked after a steady start during Friday LME pre-market trading, retreating towards current range floors, against a background of a slippage in the euro, traders said.

Sentiment in the complex remains patchy, given global macro-economic uncertainties that show little sign of being resolved. Also, some metals witnessed significant warehouse stock increases - usually a signal of slow physical conditions, but also reflecting the upcoming November 'Third Wednesday' prompt date.

"The market remains within well-defined ranges awaiting a catalyst to determine the next move," LME RDM Sucden said.

The euro backed away from its earlier highs of 1.2784 against the dollar to settle around 1.2735, still above recent two-month lows. On Thursday, the Eurozone posted a second consecutive contraction in quarterly GDP figures, falling into a second recession since the financial crisis began in 2008.

Overall, the metals complex is locked into a week-long sideways consolidation phase, given that wider financial fundamentals are challenging. As well as the Eurozone’s troubles, uncertainty emanates over how the US will resolve its budgetary fiscal cliff.

There have been some potentially positive developments, however. China's State Reserve Bureau (SRB) purchased 100,000 tonnes of aluminium yesterday, though it was less than the anticipated 160,000 tonnes. The SRB also added 100,000 tonnes of zinc to its stockpiles in order to inject cash into the domestic metals industry, which has struggled to maintain output amid weak local demand.

On the data side today, September US TIC Long-Term purchases, and the October US capacity utilisation rate will be released this afternoon.

COPPER TESTS $7,600 ON DOWNSIDE

Copper was unable to maintain initial gains, and fell back instead to test the $7,600 per tonne level once more, settling around $7,603,a $36.50 fall from the Thursday close. In inventory data, stocks rose a net 1,700 tonnes to 255,175 tonnes, the highest since July.

Since bottoming out at 212,575 tonnes in early-September, the lowest since October 2008, copper inventories have risen 42,600 tonnes, or 20 percent.

In other metals, zinc fell $21 to $1,934 with inventories climbing 9,100 tonnes to 1,160,975 tonnes, due to a 19,575-tonne warranting in New Orleans. Lead was $29 lower at $2,170. Stocks surged 8,475 tonnes to a four-month high of 332,250 tonnes, as 11,425 tonnes were warranted in Johor.

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